When we recently attended the IAB Annual Leadership Meeting in Florida, US, there was only one topic: The challenging economic situation. In 2023, markets will continue to create challenges, with major countries such as the U.S. and Germany expected to have stalled growth.
While these macroeconomics might seem very high-level, they have a direct impact on the advertising industry. Advertising budgets are often the first expense that companies cut to save costs. Therefore, we understand the worries many publishers have going into this year where growth rates might look different than in past years and inefficiencies in serving advertisers will play a bigger role.
What publishers are realizing is twofold. First, less advertising spending requires a change in focus and more creativity in finding new growth opportunities. One key area is the long-tail advertisers that are often undervalued by publishers. Second, manual processes that were long accepted due to high growth and advertising spending can no longer be ignored.
The Sub-5K Problem
In fact, we see a lot of conversations about these long-tail customers that often constitute 60-70% of the publisher's client base. In the current economic time, these clients gain more relevance as they have untouched revenue growth potential. However, their growth is often hindered by the manual process required to serve them. We call this the sub-5k problem, meaning the challenges of serving clients with less than $5k advertising spend per month.
Looking at it in more detail, three factors are causing the problem:
Manual Processes: Publishers are relying on long administrative processes for order entry, handling, and reporting. These push up the cost for smaller campaigns making them unprofitable.
Advertising Effect: Large advertisers often follow an omnichannel approach, with display being one of them. In comparison, small advertisers do not have the same resources and require publishers to offer a different advertising product to ensure a good advertising effect.
Missing Insights: Small advertisers have limited knowledge about digital advertising and require a better and more insightful debrief. This requires more work from the publisher decreasing the margins further.
These problems make it clear that publishers need to change something in their approach to be successful with long-tail customers. Given their potential for revenue growth in 2023, there are a range of upsides if a successful strategy is found. But what could a solution to the sub-5k problem look like?
Solutions to the Sub-5k Problem
There are different strategies that publishers can follow to better cater to long-tail clients. Let us look at three main alternatives.
Outsourcing and Managed Services
The first option is managed services that take over the order handling and reporting processes. This gives the publisher the possibility to focus on the sale rather than the order handling and often gives access to more advertising channels and performance due to the experience of the service partner. On the downside, managed services might decrease costs but are often still expensive, making them less of an option for very small campaigns.
Self-Service Platforms
A second option is self-service platforms that completely automate the order entry and handling step and allows advertisers to book it themselves. This option drastically decreases the cost, as all manual steps are eliminated. However, it also changes the relationship between the publisher and the advertiser. While a publisher historically spent a lot of time building relationships with advertisers, a self-service platform requires a new form of product awareness and education of advertisers to ensure a successful product. This is especially true if the advertisers have limited technological skills.
Sales Booking Tools
Another option is a sales booking tool that allows the sales agent to enter and handle campaigns themselves. Taking over most of the advertising cycle, these platforms automate the creation, handling, and reporting of campaigns and ads. The advantage of such is the elimination of manual steps through automation, whilst the relationship with the advertiser is kept. Nevertheless, such platforms also require the education of sales agents to be empowered in selling more digital solutions.
Concluding, 2023 puts publishers at the centre of economic uncertainty. This requires new creative strategies and a focus on segments that previously have been ignored. One of these segments is the long-tail customers, which are influenced by the sub-5k problem. There are different solutions that allow solving such and we are excited to see what strategies publishers will follow in 2023.